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Oando’s major shareholder to buy out minority investors

The majority shareholder in Oando Plc has agreed to a request by minority shareholders to buy out the entire shareholdings of the minority shareholders in a transaction that seeks to preserve value for the minority shareholders and the company.

Oando made this known at the Nigerian Exchange (NGX) as the indigenous energy solutions group released its outstanding interim results up till the quarter ended December 31 2020.

Oando is listed on the NGX and the Johannesburg Stock Exchange (JSE) and the regulatory filings were made to the two markets.

Oando stated that the proposed buyout of the minority shareholders was the outcome of a court ruling following a petition filed on March 25, 2021 at the Federal High Court, Lagos by 14 shareholders of Oando holding a total of 299.258 million shares, which was filed for and on behalf of Oando’s minority shareholders led by Venus Construction Company Limited.

According to the company,  the shareholders requested that the court order the buyout of their entire shareholding either by Ocean and Oil Development Partners (OODP) Limited or Oando, as the petitioners believed that this would be in their best interest as well as that of the company.

OODP has a shareholding of 57.37 per cent in Oando Plc and the above-mentioned minority shareholders 42.63 per cent shareholding.

In its response to the petition, OODP enumerated its position on the statements made in the petition and also filed a cross petition, stating its willingness to buy out all the minority shareholders of Oando via a court-ordered Scheme of Arrangement (pursuant to Section 715 of the Companies and Allied Matters Act 2020) to be approved by Oando’s shareholders at a general meeting.

In its ruling, the court issued “an order directing Oando to carry out a Scheme of Arrangement in accordance with the provisions of the Companies and Allied Matters Act 2020 to consider OODP’s proposal to buy out the shares of all the minority shareholders in Oando”.

The court granted for the cross petition filed by OODP, an order that Oando shall prepare within 30 days a Scheme Document for the purchase of the minority shareholders shares in Oando Plc for submission to the Securities and Exchange Commission (SEC) and/or the Nigerian Exchange Limited (NGX) as may be necessary.

The court also gave “an order directing Oando Plc to convene within 120 days a meeting of the holders of its fully paid ordinary shares or their duly authorised proxies/personal representatives to consider, and if thought appropriate, approve a proposed Scheme of Arrangement by OODP Nigeria for the purchase of all the minority shareholders’ shares in Oando, among others”.

The company noted that “this action precipitated by the petition from certain Oando minority shareholders, if approved by all the minority shareholders at the court-ordered meeting will result in a voluntary delisting of the company’s shareholding on the NGX in accordance with its guidelines for delisting of securities”.

The results released yesterday showed that the group posted a turnover of N490 billion in 2020. Upstream operation recorded five per cent production increase to 44,550boe/day in 2020 compared with 42,492boe/day in 2019, while downstream operation achieved 13 per cent increase in traded crude oil volumes of 16.1 million as against 14.2 million in full year 2019 and 53 per cent increase in traded refined petroleum products to 694,653 MT compared to 452,919 MT in in 2019. The group reduced net loss after tax from N207 billion in 2019 to N132.6 billion in 2020.

Group Chief Executive, Oando Plc, Wale Tinubu said year 2020 proved to be an unprecedented year for the global economy due to the impact of the novel COVID-19 pandemic.

He noted that the oil and gas industry was no exception in 2020 as the year turned out to be one of the most challenging years in its history as the industry witnessed the lowest oil prices since the group sojourn into Nigeria’s upstream sector in 2008, thus negatively impacting revenue during the period.

“This resulted in us having to impair a portion of the goodwill on our balance sheet to ensure the carrying value of our assets was a true reflection of the environment we were operating in.

“Furthermore, the second tranche funding of the settlement of a protracted and disruptive shareholder issue resulted in us taking a further impairment on a category of our financial and non-financial assets. Despite these challenges, our hedging policy and long-term offtake contracts ensured our cash flows were not severely stressed during this period,” Tinubu said.

He pointed out that amid an uncertain operating environment, operational performance remained on track as the group grew its upstream production by five per cent, whilst downstream traded volumes of crude oil and refined products ramped up by 13 per cent and 53 per cent respectively.

Meanhile, Oando noted that production decreases were a result of shut-ins for repairs, maintenance and sabotage incidences at the facilities.

During the twelve months to December 31, 2020, Oando spent $82.8 million on capital expenditures related to the development of oil and gas assets and exploration and evaluation activities, compared to $78.8 million in the twelve months to December 31, 2019.

Capital Expenditures in 2020 consisted of $80.0 million at OMLs 60 to 63 incurred on oil and gas properties, $1.5 million at OML 56 and $1.3 million capital expenditure recorded on other assets.

In 2020, Oando Trading traded approximately 16 million barrels of crude oil under various contracts with the Nigerian National Petroleum Corporation (NNPC) and delivered 694,653 MT of refined products.

However, these results are retrospective, being over two and one year late respectively thus attention should be more on the company’s present-day results specifically it’s 2021 full year earnings and 2022 quarterly results as these are a true reflection of the company’s most up-to-date financial standing and prospects.

Based on recent initiatives announced by the company, as well as the external operating environment, Oando is very much still operational with highlights that speak to a viable future including its announcement in 2021 of an expansion of its business portfolio to include renewables, a recently signed MoU with Lagos state for the deployment of electric transit buses and EV infrastructure across the state and the sustained high oil prices which the market is relying on to translate to more optimistic financials in 2022.

It should be recalled that the three-year delay in the release of the company’s results was precipitated by the Securities and Exchange Commission’s (SEC) suspension of Oando’s 2018 annual general meeting (AGM) following a dispute with an indirect shareholder, Ansbury Investment Inc.

The suspension of the company’s 2018 AGM and attendant issues prevented shareholders from being kept abreast of business operations, a move decried on numerous occasions by Oando and her executives as not being in the best interests of the market.

In July 2021, Oando entered into a settlement with the SEC on all matters subject to litigation and other issues flowing therefrom, thus putting an end to one part of the dispute with Ansbury. Key for Oando was that the SEC did not find the company guilty of any wrongdoing and by way of a settlement, was able to prevent further market disruption and harm to Oando Plc’s shareholders.

After 12 consecutive quarters of profits up until Q3, 2019, the company reported in its 2019 audited financials a loss-after-tax of N207.1 billion largely attributable to impairments for goodwill and loans associated with the indirect shareholder dispute. The settlement of this long-running dispute led to an impairment of N148 billion on financial assets but forms the final resolution and settlement of the dispute with Ansbury, the indirect shareholder whose actions had significantly destroyed shareholder value over the last four years. The company has been resolute in reiterating that all actions taken to date have always been in the interests of all Oando shareholder, furthermore shareholders have consistently asked the company to take all necessary steps to resolve this dispute and move the business forward.

The actions of both SEC and the indirect shareholder contributed largely to eroding its stock’s value significantly from its listing price of an average of N9 per share in 2017, to an average N3 per share in 2022. Despite the loss, this one action has far-reaching and positive implications – the settlement finally takes Ansbury out of the picture and will be a welcome relief for the company, her shareholders and market as it finally allows Management to focus their efforts on setting a new path for growth and value creation for her shareholders.

With 2019 behind it, the company faced a new challenge in 2020 in the form of the COVID-19 pandemic which negatively affected all corporates not just those operating in the oil and gas sector. In the company’s 2020 Full Year End financials, a loss after tax of N132.6 billion, a 36% drop from 2019, was reported. A positive skew in results from the previous year.

The decline in oil revenue is on the back of the decline in crude oil price following the outbreak of COVID-19 and the price war between Saudi Arabia and Russia, which led to a supply glut. The price war between Saudi Arabia and Russia that broke out on March 4 due to the collapse of the OPEC+ agreement was a big factor in taking an already-deteriorating situation and turning it into an existential crisis for many companies including International Oil Companies like Royal Dutch Shell, Chevron, ExxonMobil, etc. and indigenous companies like Oando amongst others. Royal Dutch Shell, ExxonMobil, BP, Total, ENI, Baker Hughes, ConocoPhillips, Chevron, Equinor, Halliburton, and Schlumberger posted a cumulative net loss of $119.2 billion. ExxonMobil posted the largest loss at $22.4 billion, followed by Royal Dutch Shell with a loss of $21.7 billion and BP with a loss of $20.3 billion. Closer to home companies such as Seplat, another indigenous player had to revalue downwards its oil and gas assets by $114.4million to reflect the lower crude oil prices of 2020 and this reversed the operating profit of US$82.7million to a loss for the year 2020 of US$85.3million, the company further incurred a non-cash impairment of $144.3 million.

Against this backdrop and like other oil and gas players across the world, Oando reported further impairments across financial and non-financial assets which significantly impacted its financials after tax.

The COVID-19 pandemic marked the cause of the third price collapse of the oil and gas industry in 12 years. It was particularly the worst shock among the three as there was an unparalleled decline in the demand for oil as well as its derivatives. This, combined with the inability of OPEC+ to agree to production cuts, resulted in a global excess supply of 35 million barrels a day by the end of Q1 2020

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